Matahari Department Store Tbk (LPPF)

(1)

NH Korindo Sekuritas Indonesia

The incline in SSSG coupled with the incline in gross sales were posted by

all stores in Jakarta, Java Island, and non

-

Java. It also posted the increment

of 65% in the total transactions compared to 3Q17’s total transactions.

In 2017, it actively performed a number of strategies to boost its market

share, such as the use of

big data analytics

for figuring the trend of

consumer behavior. The increment of 47% in loyalty membership program

caused

the direct marketing strategy to work more effectively and hit the

precise target

. Furthermore, the collaboration with Disney and several local

artists also improved the performance of sales segment and the total sales.

Target Price of IDR13,750

We use the estimate of forward P/E of 17.7x (1SD lower than the last 3

(2)

A Glance at LPPF

LPPF is a retail company running its business through Matahari brand. It was founded in

1958 as the children apparel situated in Central Jakarta. Its businesses covering retail

sales, consignment, and service revenues

target the low to middle income classes

.

Having 156 stores situated in across Indonesia, it dominates the retail market share in

Indonesia.

It performs expansion by launching new stores and developing the online platform with a

view to strengthening its market share. Moreover, it also implements the strategy

perfecting marketing and merchandising program with a view to strengthening its market

penetration.

Indonesia’s Retail Industry in ASEAN

Indonesia is the home to biggest population in ASEAN. It develops Indonesia into the

lucrative market for the retail business

. LPPF, RALS, MAPI with their stores across

Indonesia dominate the retail market in Indonesia.

The retail industry in ASEAN market is sluggish, for instance it marks the negative sales

growth figures in Singapore and Thailand. This backdrop causes the retailers in ASEAN to

strictly curb the operational cost

with a view to balancing market. Nonetheless, in 2017,

most of retailers consistently posted high price

-

earnings ration and two

-

digit ROE.

In Indonesia, Aprindo targets the growth of 9% in 2018’s retail business. In the margin

side, the

retailers in Indonesia are capable of posting higher margin

than are its peers in

ASEAN.

ASEAN Retailers

Source: Bloomberg, NHKS research

Company

Market Cap

_{(USD mn)}

Total Asset

_{(USD mn)}

_Growth

Sales

_Margin

Gross

Operating

_Margin

ROE

P/E

P/BV

Dividend

_Yield

(3)

Source: Company, NHKS research

SSSG | 1Q14

-

4Q17

Operational Performance

Sales | 2014

-

2017

Number of Stores | 1Q15

-

4Q17

Source: Company, NHKS research

SSSG by Region | 1Q15

-

4Q17

Source: Company, NHKS research

(4)

Multiple Valuation

Forward P/E band | Last 3 years

Dynamic Forward P/E band | Last 3 years

Rating and target price

Date

Rating

Target Price

Last Price

Consensus

vs Last Price

vs Consensus

03/02/2018

Buy

13,750

10,800

12,751

+27.3%

+7.8%

Closing and Target Price

Source: NHKS research

Analyst Coverage Rating

Source: Bloomberg

Source: NHKS research

NH Korindo Sekuritas Indonesia (NHKS) stock ratings

1. Period: End of year target price

2. Rating system based on a stock’s absolute return from the date of publication



Buy

: Greater than +15%



Hold

:

-

15% to +15%



Sell

: Less than

-

15%

(5)

Summary of Financials

DISCLAIMER

This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained from reliable sources, it accuracy and completeness cannot be guaranteed. PT NH Korindo Sekuritas Indonesia, its affiliated companies, respective employees, and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for errors, omissions, misstatements, negligence, inaccuracy arising herefrom.

LPPF Summary

Last Price (IDR) 10,800

Target Price (IDR) 13,750 2016/12A 2017/12A 2018/12E 2019/12E